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Dutch pension funds potentially forced to cut back pension rights

Because of a failure to show sufficient recovery of their solvency ratios since 2009, 14 Dutch pension funds (including ABP) may be forced to reduce the accrued pension rights of their participants.

Dutch pension funds are required to have a solvency ratio of at least 105 per cent of their liabilities. Funds dropping below this funding level are required to present a recovery plan to the Dutch National Bank (DNB) proposing to improve the funding level up to the required minimum within a period of three years. At the beginning of 2009, the Dutch government temporarily extended the time period for restoring the ratios from three to five years. The extension was subject to a review of the individual performance of funds in mid-2010, to assess whether there had been sufficient improvement to allow continued postponement until 1 April 2012.

This August, the Dutch government announced it no longer deemed a further postponement to 14 of the concerned pension funds practical. These pension funds will therefore need to consider whether to take cut-back measures and, if so, must implement these by 1 January 2011 unless they can convince the DNB that such measures are not necessary.

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